China’s liquidity growth maintained momentum in June on the back of cuts in interest rates and banks’ reserve requirements. China’s central bank says it will fine-tune its policy to provide ample and appropriate liquidity for the economy.
China’s M2 figure, or the broad measure of monetary supply, hit about 133 trillion yuan by the end of June. That’s up 11.8 percent from the previous year. During the first six months of this year, China’s newly issued yuan loans increased 6.6 trillion yuan, with nearly 89 trillion yuan in outstanding loans by the end of June. Economists say ample liquidity in China’s interbank market and falling interest rates have lowered financing costs in the real economy.
China’s loans to small and micro sized enterprises, and the real estate sector have grown rapidly in the first six months. In the mean time, medium and long term loans also increased quickly, with a large part injected in fixed-asset investment and infrastructure construction.
In order to support the economy, China’s central bank cut its lending rates in June for the fourth time in seven months. It also lowered the amount of cash that some banks must keep as reserves. Economists say those moves have helped boost loan demand.